During the meeting held in Barcelona (Spain) in May 3rd, the Governing Council of the European Central Bank (ECB) decided to maintain the interest rates applicable to date. This decision was taken in a scenario in which, although a gradual recovery is expected over 2012, the levels of uncertainty in euro area economy still remain.

According to the decision taken by the Governing Council of the European Central Bank (ECB), interest rate on the main refinancing operations will remain at 1% and those applicable to marginal lending facility and the deposit facility will remain unchanged at 1.75% and 0.25% respectively. The Bank still expects that in the long term, keeping very low short-term interest rates in the euro area, as well as the support provided by foreign demand and all the measures taken to foster the proper functioning of the economy, will help to a gradual recovery of the euro area economy in the course of the year.

ECB President, Mario Draghi, also highlighted that although it is likely that inflation will remain above 2% in 2012, price developments are expected to remain in line with price stability over the policy-relevant horizon. According to Draghi, latest survey indicators for the euro area highlight prevailing uncertainty. The remaining tensions in some euro area sovereign debt markets and their impact on credit conditions, as well as the process of balance sheet adjustment in the financial and non-financial sectors and high unemployment, are expected to continue to dampen the underlying growth momentum.

Under the current monetary conditions, with a modest expansion rate, the Central Bank stresses the importance to ensure fiscal sustainability and sustainable growth in the euro area. According to the Bank, although the comprehensive fiscal adjustment is affecting economic growth in the short term, it is expected that the measures taken by national governments will contribute to the sustainability of public finances and, therefore, the decline in sovereign risk premia.